An excuse has been defined as “the skin of a reason stuffed with a lie”. In the process of preparing over 30,000 Reserve Studies for Associations across the country over a period of 26 years, there are two Boardmember sentiments we hear most frequently expressed: “We can’t afford the Reserve Funding Plan” and “We’ll worry about that next year”.
This is a very common question and the idea of “Percent Funded” is still confusing to many associations. So before we answer the question, let’s define what it means to be 100% funded.
To be 100% funded means as of a particular point in time the Association has Reserve funds on hand exactly equal to the deterioration of its Reserve components. It does NOT mean that the Association has 100% of the funds needed to repair and replace all the components in the Reserve Study.
Why put more money into your Reserve Fund than necessary? I can’t think of a good reason! You don’t want to make Reserve contributions that err on the side of being too little, that may lead your Association toward a Special Assessment, borrowing, or the even higher costs that come with deferred maintenance.
A body of new legislation affecting Florida associations was signed into law on 6/1/2010. Most significant in our opinion was the “Distressed Condominium Relief Act”.
The “Funding Plan” is a calculated plan of regular monthly assessments and/or special assessments necessary to perform common area repairs & replacements in a timely manner.
“Fund your reserves above the 70% level”. That’s what you thought I would say, because our industry has been telling you that for years, right?
